Chetty, Hendren, Kline, Saez, Turner: Is the United States Still a Land of Opportunity? (2014)
The Point: The authors find that intergenerational mobility in the United States has not decreased over time (looking at birth cohorts from 1971-1993), despite the fact that inequality over this time period has increased.
The Quote: "Envision the income distribution as a ladder, with each percentile representing a different rung. The rungs of the ladder have grown further apart (inequality has increased), but children's chances of climbing from lower to higher rungs have not changed (rank-based mobility has remained stable)." (141) "We find that children entering the labor market today have the same chances of moving up in the income distribution (relative to their parents) as children born in the 1970s." (141)
The Method/Data: The authors look at a joint distribution of parent and child incomes. They have two samples: children born between 1980 and 1993 and children born between 1971 and 1982 (their is an overlap of two years). To determine the children's parent's income, the authors look at tax data where the children are listed as dependents. Next, they develop a "rank-rank specification" of intergenerational mobility. They do this by assinging a rank to each child, which compares him or her to other children in their birth cohort based on the child's income level when they reach the age of 29-30 (for the youngest children in the sample they create a rank based on college attendance). Similarly, they rank the parent's income by comparing the income levels of each of the parents whose children are in the same cohort. The study is based on analyzing the relationship between the children's ranks with the parent's.
Citation: Chetty, Raj, Nathaniel Hendren, Patrick Kline, Emmanuel Saez, and Nicholas Turner. 2014. "Is the United States Still a Land of Opportunity? Recent Trends in Intergenerational Mobility." American Economic Review, 104(5): 141-47.